A sideways look at economics
There is a lot more to publishing economic research than there might seem: coming up with ideas, collecting the data, interpreting those data, looking for interesting angles, poking holes in your own arguments, and having (ahem) ‘helpful’ colleagues do the same. Oh yes, throughout the process, we debate things among the team. When we put together our quarterly forecasts those discussions can last for hours, and get quite animated. Today, to give the outside world a flavour of such discussions, I publish excerpts of a Teams chat between myself, the editor and another colleague as we debated a chart caption. Discussion on how to present the facts soon develops into a lively argument about who ought to blink first in the great COP26 climate showdown.
BD: I’m not saying China should be given more time to decarbonise – China is saying they should. My view is they might have some justification, but equally that’s not really possible given the world’s carbon budget. KL has a slightly different view on that, I think
JB (editor): Where do you and KL diverge in views?
BD: I don’t want to prejudge KL’s view, but I suspect he thinks China should be given more time; or else perhaps that reaching net zero is too difficult and not worth pursuing
KL (charts editor): My view is net zero by 2050 globally won’t be achieved. China’s targets are inconsistent with Paris, but probably so are everyone else’s, or at least a lot of other countries
BD: Nearly half the world’s countries have committed to net zero 2050
KL: If only half have, then they will need to commit to net negative for global net zero to have any chance. Before even considering that, making a commitment is easy
BD: Point is, China’s target is inconsistent with Paris. And they are the biggest, which is why we are writing about them
JB: Out of interest, do other countries have targets that are inconsistent with the Paris accord?
BD: Around half don’t. What matters are the big countries
KL: It would be pretty easy to write a completely different piece here: instead of bashing China, bashing the US for being the biggest contributor to CO2 stock, and having double China’s emissions per capita despite being extremely rich, and still having no internal consensus on reaching net zero. We have some material on that, I know
BD: You edited out my bullet saying the Biden administration needs to put up or shut up!
KL: Not because it’s not true, but because it wasn’t directly relevant here. My view is that if you start from a position of reaching net zero by 2050, almost everyone could be criticised. Biden for example is committed to that in theory, and yet is jawboning for lower oil prices. The UK is committed — and yet there is no political will even to let fuel duty rise by inflation, never mind increase it a lot
BD: Yes, that’s the point, bashing US for the sake of it is not relevant here. I’m not bashing China just for the sake of it. Fairness issues, and who contributed to stock in the past, is not on the agenda in a big way. It has been debated for years, but now even poor countries are agreeing to net zero by 2050 – they just want financial and technological help to do so. The three big things for COP26 to be a success are: China to cut more aggressively; US to walk the walk (finally); and rich countries give money to poor countries. And China, as the numbers show, has contributed their fair share to the stock
KL: China is still below their share of world population when it comes to stock
BD: Only by 1 or 2%, and by 2025 they will be well above. Under current plans they will be hugely above. Why are you defending them, anyway?
KL: I’m not defending them, but I do think countries that are richer and have massively overcontributed to stock should do more. Maybe that’s why China plans to reach net zero a decade later
BD: China have the tech and resources to do it earlier. And they are the largest emitter – the world can’t afford to give them a free pass. And they have contributed their fair share to stock
KL: The US is richer and has lower emissions now. Why can’t they reach zero first?
BD: Rich countries cannot do much more to cut quicker [than net zero by 2050] – which is why they have committed to give £100bn a year to poor countries, to help them cut quickly too
KL: They could increase fuel duty immediately, instead of cutting it
BD: The US needs to do more – everybody knows that. Biden has a nice plan, but now Republicans need to get on board with it
KL: $100bn a year [the OECD annual target for rich countries to give to poor countries to help them reach net zero] is $500m per country
BD: Should the rest of the world just give up due to the Republicans?
KL: No, but I understand why countries that are much poorer than the US would baulk at being bullied when the US itself is dragging its feet
BD: If EMs play it right, some of them can do extremely well from net zero transition. Big business opportunities. If poor countries do nothing, they will suffer more than US
KL: For sure, and it’s the US that will be best able to mitigate and adapt
BD: Exactly, so it would be pretty stupid for EMs to say, well if the US aren’t doing anything then we aren’t either
KL: But if US doesn’t do anything it would be pretty stupid for them to do anything either
BD: But back to my original point: for COP26 to be a success we need something from China and the US, and rich country commitment to give poor countries money. These are the key items on the agenda.
JB: We ought to publish this as a Socratic dialogue. It is far more interesting than this chart caption
So there you have it. Climate activist on the one side, climate broflake on the other, and a bemused editor in the middle: and all for a four sentence-long In Brief. Think that was a lot? Wait till you hear our conversations about the Fed, or inflation!
It’s healthy and useful to kick viewpoints around like this, as it ensures that a breadth of possible interpretations is examined before we settle on Fathom’s position. You’ll have noticed there was some discussion about what should be done, and who should do what. I need to point out though that while we do express our opinion on things from time to time, privately, or behind closed doors, what we always keep in our minds for publication is to set out impartially what our clients need to know. Sometimes the public sector will ask us for policy advice, and we give it. But even then, it is based on fact, on reasoning and analysis, not on personal opinion. We consider differing views, but never at the expense of accuracy and balance.